ADB ( Asian Development Bank)

The proposal was made in 1963 to establish Asian Development Bank by the expert group of regional cooperation of the UN’s Economic Commission for Asia and the Far East (ECAFE). By reaching a multilateral agreement in December 1966. The objective of the bank is to stimulate economic development of member countries by promoting optimal Utilization of regional resources.

ADB is a regional development bank established for lending funds promote investment, and provide technical assistance to member developing countries in the region and foster economic growth in cooperation in Asia. Membership consist both regional and non-regional countries, which are 66 in number. Nepal is one of the founding member. The 19 non regional members (i.e Australia, Belgium, Canada, Denmark, France, Finland, Germany, Italy, Ireland, Luxemburg, Netherlands ,Norway, Portugal, Sweden, Switzerland, Spain, Turkey, U.S.A, U.K) were  received to develop economic ties of Asia.

ADB is one of the largest multilateral donors of Nepal. Considerable loan assistance has beesn contributed in the sectors of agriculture, agro industry, transport and communication, energy, industry, education, water resources, forestry and first one being in the fields of air transport.

IMF (International Monetary Fund)

The IMF and World Bank  came into existence when the international monetary scene became chaotic, exchange rates fluctuated at times freely and times under the influence of politics,. Foreign reserves were subject to unpredictable devaluation. The world was completely shattered by the devastation of Second world War. And  as world War II closed to an end, some countries endeavoured to bring new economic stability and development. As the outcome of Bretton Woods Conference held at a resort hotel of New Hampshire, USA, in july 1-22, 1944, the IMF and World Bank came into being 730 persons attended the conference from 44 countries but two exceptionally talented men (Harry D. White of USA and J.M Keynes of Britain) played dominant role, by whose direction the world has achieved the present most advanced state of international economy.

The IMF focuses on short term measures like recovery fromBOP shocks, manage exchange rates, and design mutually consistent set of macro-economic policy agenda. Nepal World Bank on September 6, 1961.

Merchant Bank

Merchant banking institutions offer various specialist services such as loan syndication, financial and management consultancy, project counseling, portfolio management, formulation of schemes for rehabilitation, guidance on foreign trade financing and management and advisory services to medium and small savers. Merchant banks are involved in underwriting of shares , issuance and management of shares, unit trust management. It gives advise on restructuring of capital, amalgamation mergers and acquisitions etc.

Merchant bankers Regulation 2064 has come into effect. The expectation from the introduction of this regulation act is it will help in better management of capital market. This regulation has defined four entities: (i) Issue Manager (ii) underwriter (iii) Share Registar and (iv) Portfolio Manager.

Issue manager manages issue of shares. Underwriter underwrites shares that are not sold and buys them. Registar keeps all the records of the shareholders and Portfolio Manager helps investors to manage their portfolio. Merchant bank must have separate license to operate as either one of the four or all of the four from their regulatory authority i.e Security Board of Nepal. Earlier, merchant banks were under dual regulation of NRB  and SEBON.

Finance Company

Finance companies are multiplying in the country like locust. They are contributing significantly to pool the distributed deposits where commercial banks could not play an effective role. The interest rates  provided by finance companies  are comparatively higher than the banks but still as the decisions and works are done much faster than the banks, people who are in hurry do not care the higher interest rates and the heavier service charges levied by them.

Earlier, finance companies were categorized into non-banking institutions and were allowed to collect deposits only on fixed deposit account, but the umbrella act under BFIA 2006 removed the barriers to make it competitive and allowed it to collect deposits in savings and current accounts also. BFIA 2006 classifies finance companies into class-C licensed institutions. The major function of Finance Companies are to collect deposits in current, savings and fixed term deposit accounts, provide short term and long term credit to businessmen and small industries. Provide installment loans to purchase consumer goods like computer, car, motorbike, refrigerator, washing machine etc.

Development Bank

Development banks are established for the development of a special sector of the economy. Nepal Industrial development Corporation was established in 1956 with the objective of providing medium and long-term loans for the establishment, development, and modernization of private sector industries. Besides providing loans, other objectives were to participate in shares, underwrites shares and debentures, transfer and deal in shares and establish industries. Small industry development corporation was established in 1960 to provide loans to small scale industries and it was merged with NIDC in 1971.

After the introduction of Development of  bank Act 1995, there was ruh to establish Development banks which brought many development banks and regional development banks in operation. The main objective was to improve the living standard of people by providing credit to poor and small entrepreneurs. The bank and financial Institutions Act 2063 categorizes Developments Banks into class-B category’s licensed institutions.

Central Bank

Central Bank is the bank of all banks. It is the supreme body, which controls and stabilizes the economy of the country through various direct and indirect means of monetary policy. In means, it uses the selective credit control (margin requirements) while extending loans  government securities as a tool to expand  and contract the economic activies of the country an in indirect means it uses tools like issuance of treasury Bills, National Savings Bonds, bank rates, SLR, CRR etc.

Central Bank neither maintains accounts of public nor it give loans to the public. Central bank focuses on the monetary stability of the country and not on profit. Nepal Rastra Bank was established on 26^th April 1956. Central Bank is established with the motive of national welfare and not for profit generation.  It is empowered by law for the control and stability of the monetary and financial situation of the country. Central bank should not be effected by politics. It should not compete with commercial banks. The main functions of central bank is to issue notes. Central bank act as the clearing house for the commercial banks. Every commercial bank has to maintain a definite percentage of its liability (domestic deposits) with the central bank in the form of cash reserve ratio (CCR).

Commercial Bank

The commercial banks are those banks that pool together the savings of the community and arrange for their productive use. In the process of such intermediation, commercial bank plays fund raised from different sources into different assets with a prime objective of profit generation an administrative assistance. According to commercial Bank Act 2031, “commercial banks are those banks which are established under this act to perform commercial function.” The commercial banks pool together the savings of the community and arrange for their productive use. They supply financial needs of modern business.

“The commercial bank has its own role and contribution in the economic development. It is a resource for the economic development, it maintain economic confidence of various segments and extends credit to people.”Though the commercial banks were establishes with the concept of supplying short-term credit and working capital need of industries, they have been providing long-term loans for up to 15 years. After the enforcement to lend to priority and deprived sector, these banks initiated to provide credit to small and cottage industries, agriculture and services.